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Charitable Donation Tips for Boomers

When it comes to charitable donations, boomers aren’t hesitating to open their wallets.

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According to a recent study from Blackbaud that analyzed the donation habits among the generations, baby boomers made up 34% of the donor base in the U.S. What’s more, the company, which provides software to nonprofits, revealed that the bulk of charitable money will come from baby boomers for at least the next decade.

Charitable giving can make you feel good, but financial experts stress that having a plan can help make the most of your contributions. According to Blackbaud, homeless shelters, places of worship and health service organizations are the biggest beneficiaries of charitable givers across all ages.

Dave Richmond, president of retirement consulting firm Richmond Brothers in Jackson, Mich., discussed the following charitable contribution tips for boomers:

Boomer: What is the best way baby boomers can create a charitable plan and establish a charitable solution?

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Richmond: Boomers should assemble a team that will enable them to meet their objectives. You will need a certified public accountant, because taxes are always a key consideration, and you may or may not need an attorney for legal advice. A financial advisor can quarterback the whole process for you.

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You can lay out your goals once you have your team members in place. The most important part of planning is determining the length of your giving: Do you want your charitable plan to be based on a one-time event, a multi-year operation, or in perpetuity?

Boomer: What is meant by ‘giving options’ in terms of making a charitable donation?

Richmond: Your giving options refer to how you decide to enact your charitable plan. Writing a check one time requires different planning from an ongoing campaign. If you want your charitable legacy to extend past your death, you will need to plan for a trust or foundation.

Another key consideration is whether you need retirement income from the asset you plan to donate. For instance, I have a client who owned a house that appreciated in price substantially over the course of many years. They no longer needed the real estate asset, but they needed to plan for ongoing retirement income. The best option, which they chose, was to give the house to their favored charity – a university – on the condition that the university provide them an annuity that paid our client tax-favored income for the remainder of their lives. When they die, the university keeps their house.

Boomer: Can you explain private foundations and their tax benefits along with what costs are associated with setting one up?

Richmond: Private foundations provide donors with the most options, but they are also the most expensive structure to establish and maintain. A foundation can accept a wider variety of assets beyond stocks and bonds. You can give homes or assign part of a business asset to a foundation. Bill Gates, for example, transfers part of his Microsoft ownership stake to his foundation every year. The catch is that you have to pay professionals to take care of the foundation’s tax reporting, legal work and investment management.

Boomer: Are there alternatives to private foundations?

Richmond: A lot of cities have community foundations. Some of these, depending on how they’re structured, will give you choices on where you can spend your donation. Others don’t offer many options, and they provide significantly less control, but they’re also significantly easier. You have don’t have to oversee their tax filings, so the IRS will never come knocking on your door.

Boomer: What is a Donor Advised Fund?

Richmond: Many of the major brokerage firms have set up large charities so their charitably-inclined investors can achieve economies of scale with their donations. This is a less expensive way for someone with a few hundred thousand dollars in savings to create a legacy that carries on past their lifetime. These can be set up as irrevocable donations. In this case, you retain the flexibility to switch charities, but you can never take your money back.